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TMI Blog2005 (3) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... in the territory and to sell, install, maintain and service licensed products; that the "Licensed Products" means such model of equipment as designated and identified in Appendix I to the Agreement and the specifications of the Licensed Products is described in Appendix 2; that "Existing Products" means the air conditioning equipment which the Appellant has been desiring to be improved and modified by Daiken and the model of equipment shall be designated and identified in Appendix 3; that Daikin also grants the Appellants an exclusive and non-transferable right in the territory to use Daikin Technology which means the specific technical information on the Licensed and Existing Products, technical information on the assembly, adjustment, Listing, quality control, installation operation and maintenance of licensed Products and Existing Products. He contended that it is apparent that the technology relates to post importation period and the same is not related to the goods imported by the Appellants. He, further, mentioned that they imported components/sub-assemblies for local manufacturing of the products; that the Deputy Commissioner, under Order dated 8-11-2000, has held that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Rule 9(1)(c) of the Customs Valuation Rule is that the payment of the royalty or license fee should be a condition of the sale of the goods but not the converse; that the Larger Bench of the Appellate Tribunal has held in the case of S. D. Technical Service v. CC, New Delhi [2003 (155) E.L.T. 274 (T-LB) that know-how relates to manufacture of the licensed equipment in India and has no relation whatsoever to the goods imported. Reliance has also been placed on the following decisions : (i) Polar Marmo Agglomerates Ltd. v. CC, New Delhi [2003 (155) E.L.T. 283 (T-LB)] (ii) Panalfa Dongwon India Ltd. v. CC, Mumbai [2003 (155) E.L.T. 287 (T-LB)] (iii) Pall Pharmalab Filteration P. Ltd. v. CC, Mumbai [2004 (178) E.L.T. 773(T)] Final Order No. 1092/04 NB(A), dated 29-9-04 wherein the Tribunal has held that the Cost of royalty and technical know-how is not includible in the value of the goods imported as there is no material adduced by the Revenue to show that the same is a condition pre-requisite for supply of goods by the foreign supplier. 3.2 The learned Counsel also mentioned that in terms of Article 11.1(2), they are required to pay royalty of 4% on the ex-factory sale pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "any components and materials supplied from Daikin under separate agreements to be concluded between DAIKIN and the Appellants; that thus clearly binds the Appellants to purchase the components from M/s. DAIKIN and as such is a condition pre-requisite for supply of technical know-how; that further Article 19.2 does not visualize indigenous production of the components; that in fact this Article binds to import the components from M/s. DAIKIN; that Article 19.2 provides that the Appellants have not only to notify DAIKIN if they intend to substitute particular K D Components by local components but have to set out reasoning at least three months prior to the commencement of production using substitute local component and seek DAIKlN's prior approval. The learned Senior Departmental Representative also referred to Annexure 5 of the Memorandum of Appeal which is a "List of components/Sub-Assemblies Imported" which shows that the components supplied were also non-standard one and even bought out components have been purchased through M/s. DAIKIN only. The learned Senior Departmental Representative contended that the licence fee and royalty are thus related to the imported goods and prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and examined and if there is any clause which shows connection between the payment of licence fee/royalty and the goods imported by the Appellants, provisions of Rule 9(1)(c) would be attracted. In the present matter, the following Articles in the Technology Collaboration Agreement clearly shows the connection between the payment of royalty/licence fee and the goods imported by the Appellants. 1.5 "K D Components" means any components and materials supplied from DAIKIN under separate agreements to be concluded between DAIKIN and LICENSEE. 1.6 "Local Components" means any components and materials other that K D Components which may be produced or procured by LICENSEE within the TERRITORY subject to the provisions of this Agreement. 15 Supply of K D Components - Detailed sales terms and conditions for the supply of KD COMPONENTS from DAIKIN to LICENSEE, including but not limited to price, payment, ordering and claims shall be separately agreed upon by and between the parties hereto. 19. Components and Materials 19.1 Adoption of LOCAL COMPONENTS by LICENSEE shall be subject to DAIKIN's prior written approval. LICENSEE shall not use any such LOCAL COMPONENTS as would, when used ..... X X X X Extracts X X X X X X X X Extracts X X X X
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